Struggling retailers stunned by decision to delay review of surging business rates

Hard-pressed retailers were dealt a severe blow today after the Government announced there would be no review of business rates for five years.

The British Council of Shopping Centres said the industry would be shocked by the move. It is likely to mean more increases in the local tax on businesses at a time when they are struggling through the first double-dip recession since 1975.

Communities Minister Brandon Lewis argued the decision would mean prices would not increase in 'real terms' because rises are linked to inflation. To revalue businesses today, he said, could lead to unexpected hikes in the tax paid by firms.

Feeling the pinch: Shops are struggling to stay open in the recession

Instead, businesses in England will be reassessed in 2017, rather than 2015, by which time Mr Lewis said he hoped the economy would have recovered.

In a written ministerial statement, he said: 'This decision will avoid local firms and local shops facing unexpected hikes in their business rate bills over the next five years.

'As business rates are linked to inflation, there will be no real-terms increase in rates over this period. This reform will provide certainty for business to plan and invest, supporting local economic growth.'

He added: 'Since the last revaluation (based on 2008 valuations), the economy and property market have faced exceptional changes. A revaluation at this point would be likely to result in sharp changes to business rate bills in many parts of the country and in many sectors.

'Tax stability is vital to businesses looking to grow and help improve the economy.'

But the British Property Federation (BPF) called the decision 'a further blow to the country’s struggling high streets'.

Retailers have united behind the Reduce Our Rates campaign run by Financial Mail and This is Money to alleviate pressure on suffering High Streets and independent shops.

Last week Marks & Spencer chief executive Marc Bolland spoke out for the first time on the need for Government to step in to help retailers.

He said: ‘The High Street is the British way of life, but it needs to be more strongly supported on a central level.’

Many shopkeepers complain that business rates have become their biggest burden, as landlords increasingly show leniency on rent to keep shops open.

The Chancellor has the discretion to hold rates steady or increase them by up to the previous September’s figure for the Retail Prices Index (RPI) when he delivers his Autumn Statement on December 5. He has so far opted for the maximum rise each time.

Figures this week showed RPI, which tends to run higher than the more widely used Consumer Prices Index, was 2.6 per cent. This is likely to be passed on in April.

Business rates have already risen dramatically in both 2011, at 4.6 per cent, and 2012, at 5.6 per cent.

Liz Peace, chief executive of the British Property Federation, said: 'The decision by Government to delay the revaluation until 2017 is a real shot in the foot for the retail industry.

'A revaluation should shift the burden from those who are suffering to those who are prospering. By postponing the Government is not allowing the downward adjustment that would otherwise take place for suffering retailers.

'The postponement embeds injustices in the current system, where businesses pay top of the market rates in a depressed climate, for an additional two years at the worst possible time. With technological and other advances arguably we should be valuing more frequently, not less. That way, business are paying rates that closer reflect their circumstances.'

Jerry Schurder, head of rating at consultants Gerald Eve, said. 'This is awful news for retailers especially and it is preposterous to claim that this provides any real benefit to businesses. Business rates are already far too high and are a cause of hardship and vacancies in the high street, because bills are based upon pre-recession rents.

'Businesses have already waited too long for the rating system to adjust to the state of the economy and to make them wait a further two years will cause much further hardship to the economy.

'The Government claims that the decision will remove uncertainty and assist future budgeting but, frankly, given the choice businesses would far prefer the early prospect of lower bills even if they could not predict the precise amount. This is a perverse decision which will not achieve the claimed benefits and should be strongly opposed.